Unit 5 part 2: Taxable benefits Flashcards
What is an automobile allowance?
an allowance you pay an employee for them to use their own vehicle.
This is taxable unless the amount you pay them is considered to be a reasonable per km rate.
Are automobile flat rate allowances taxable or non-taxable
usually taxable benefit
are cell phone services taxable benefit?
usually it is not a taxable benefit
it becomes taxable if the employee uses the phone for personal use that goes beyond reasonable; goes beyond what the plan covers, the employee does not reimburse the employer for excessive use, and the plan has a fixed cost and considered a standard plan.
Are club/ fitness memberships a taxable benefit?
yes, if there is no principal advantage for the employer
Are company assets sold to employees taxable
if sold for less than market value they are taxable
the taxable benefit is the difference between fmv and purchase price
Are company discounts a taxable benefit
the difference between market value and cost to produce it is taxable
unless the products are old or damaged
what are company discounts
when employees can purchase products below the cost of manufacturing it
when is a company discount not taxable
if the discount is available to all employees and are above the cost to produce them or if they are old or damaged
Are counselling fees a taxable benefit
not if they are for physical or mental counseling, job search counselling for terminated employees, or retirement counseling or job related
are frequent flyer benefits taxable?
not taxable if an employer reimburses the employee for flights that generate frequent flyer points when the employee pays for it themselves on personal credit card
Unless,
- they convert the points to cash or
- the employee and employer have an agreement that the points reflect part of their earnings or
- if it is a form of tax avoidance
if so , the cash market value is the taxable benefit
also, if the employee uses the points accumulated on a company credit to travel
are Gifts and Awards a taxable benefit
taxable if they are given to an employee by the employer
- they may receive up to $500 per year in non-cash, near cash or cash for special occasions or achievements, anything over $500 is taxable
what are some non-cash gifts and awards
sporting event tickets
what are some near cash gifts and awards
such as a gift card, can easily be converted into cash
Are group term life insurance benefits taxable
any portion of life insurance coverage that is paid by the employer on behalf of the employee is taxable
EX. Life insurance taxable benefit
bi-weekly pay period
coverage is $50,000 per year
total cost is $1.00 per $1,000 worth of coverage
employee pays 25%, employer pays 75%
what is the taxable benefit
employee: .25 per $1,000
employer: .75 per $1,000
taxable benefit: 50,000 x (.75/1000) = 37.50 per month
to convert to bi-weekly amount: 37.50 x (12/26) = 17.31 per pay
Is group life insurance taxable, pensionable and insurable?
THis is the same for AD&D (Accidental death and dismemberment)
it is taxable and pensionable but not insurable (do not deduct EI)
Are meals allowances a taxable benefit?
not if the
1. allowance is reasonable,
2. if the overtime is more than two hours before or after their shift
3. and if it is less than 3 times per week.
All must be met
are subsidised meals taxable?
not if the cost is considered reasonable
if not reasonable, then calculation is (actual cost - what employee pays)
difference goes in box 14 and code 40 under other information on t4
Subsidised meal not reasonable please calculate the taxable benefit
if the employee pays $3.50 for a meal but the actual cost of the food, its preparation and service is actually valued at $5.50 then what is the taxable benefit
5.50 - 3.50 = 2.00 per meal is recorded on t4
Is parking taxable
it is taxable if the employer pays for an employee’s parking at the regular place of business
the taxable amount is FMV - what the employee pays to employer
What are the exceptions for parking paid for by the employer at the business. That make it non-taxable
- not taxable for disabled employees
- if used for both employees and others such as shopping mall parking lot
- if you supply scramble parking where there are not enough spaces for all employees
- if the employee has to use either their own or your vehicle to do their job AND if the parking is for business purposes
Are professional membership fees taxable benefit?
not taxable if the employee is required to be a member by the employer who pays the fee
If an employer pays for an employee’s RRSP is it taxable
yes plus administration fees are taxable because it is cash it is also pensionable and insurable
When are RRSP’s that the employer pays for not taxable?
if the employee is able to use the contributions as a tax deduction on their personal income tax
When do employer RRSP contributions become non insurable
if the employee cannot withdraw that amount until they either retire or leave the company (except if the use it for Home buyers or life long learning plan)
if the amount of the RRSP is withheld from the employees income is it taxable or non-taxable
non-taxable
if the employer allows the employee to contribute RRSPs to a third party financial institution the amount they withhold and forward to the third party is it taxable?
is only a deduction on the employee’s earnings, that taxable deduction they receive does not occur at the source, it occurs when they file their personal income tax
if a spouse travels with the employee and their expenses are paid and the spouse is not involved in the business activities is it taxable?
yes
are tool allowances taxable?
yes
if it is for tools for their trade, they can request A T2200 declaration of the conditions of employment which they can use to offset the taxable benefit when they file their personal tax return
Are uniforms and special clothing taxable
if it is special clothing required for the job it is not taxable
if it is not required by the employer or by law then it is a taxable benefit
where are taxable benefits found on a t4
box 14 and the other information boxes
the most common code is 40
